As has been widely reported, the EU is to investigate the application of tax law to specific corporations in Ireland, the Netherlands and Luxembourg. I broadcast on this several times yesterday but have not commented.

Let’s ignore the companies involved for now: these are test cases, and the EU has specifically reserved the right to look at more.

And let’s also get straight out of the way the idea that this is about putting the tax systems of these places on trial: it is not. No one in the EU has the legal power to say these countries may not, for example, offer low tax rates.

That’s not what the investigation is about. The investigation is about whether or not sweetheart deals have been done on transfer pricing, residence (and maybe other issues) to make already low tax rates even more attractive to multinational corporations.

My suspicion is Ireland and Luxembourg have very good reason to be worried. Starbucks walked the Netherlands straight into this with their evidence to the Public Accounts Committee.

That’s the process then, but that is only stage one. If evidence is found the investigation can be widened. And if abuse is found then fines can be imposed on the states in question. Note, the states. They need to be worried.

7 Responses

The Dutch government has been lying to the public, denying being a tax haven.
With the EU report, it is now big news. Although they now call it an incident, their ‘building of lies’ starts falling apart.

Was this the one (read it recently but might not be 100% accurately recalled) where in 2004 (2204 is a typo) they said if the money was repatriated, it could then be invested and new jobs be created?
So a deal was done so that they paid five and three quarters percent tax instead of the 35% (which is a maximum) but only two companies did use the money to invest and the others used it for share buy back and dividends.
Good news for whom?

Unless the money was stuffed under their mattresses, then the original investors will have put that money back into the economy via consumption or reinvestment so the effect would still be an economic stimulus. Correct?

If the Commission find that illegal state aid was given without being notified (as it obviously wasn’t, if it exists), then the companies can be forced to repay the aid to the relevant government, with interest. That is the standard penalty for non-notified aid that is incompatible with the common market (i.e., illegal).